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Improvements on the quantification of external costs

Improvements on the quantification of external costs. External costs of energy and their internalisation in Europe Bruxelles, 9 December 2005. Andrea Ricci ISIS. Background. Research so far has provided a “usable body of knowledge” Increasing awareness

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Improvements on the quantification of external costs

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  1. Improvements on the quantification of external costs External costs of energy and their internalisation in EuropeBruxelles, 9 December 2005 Andrea RicciISIS

  2. Background • Research so far has provided a “usable body of knowledge” • Increasing awareness • Technology and policy choices (standards, Directives, extended CBA) • Internalisation • BUT… • There are still gaps and needs for improvement in several areas • Methodologies => better quality and reliability of external cost data, reduced uncertainties • Coverage => additional technologies, burdens, impacts, pathways, countries • Practical implementation =>integration into policy and decision making: LCA, Modelling/scenarios

  3. Methodological improvements • Atmospheric modelling • Complexity of physical process (chemical transformation, orography, meteorology, background concentrations) • Trade off between accuracy (better models) and simplicity (parametrisation) • Finer representation (modelling) at local level • Impacts across continents => Hemispheric modelling of airborne pollutants

  4. Methodological improvements • Global warming • Large uncertainty of cost estimates, reflecting • Uncertainty of emissions/climate change scenarios • Context dependency of impacts (including e.g. discount rate) • Combined approach: joint use of damage and avoidance estimates • Better estimation of damage costs • Inclusion of additional sectors (e.g. tourism) • Inclusion of additional GHG (SF6, PFCs, HFCs) • Better estimation of avoidance costs • More and better scenarios (socio-economic, policy, energy sector) • Inclusion of additional GHG

  5. Methodological improvements • Mortality and morbidity • Prevailing weight in damage costs (e.g. air pollution) • Mainstream approach: Contingent Valuation (CVM) • Reliability and accuracy issue • Value Of Life Years lost (VOLY) to measure changes in life expectancy • Quality Adjusted Life Years (QALY) to measure morbidity impact • More and better surveys • Extension of geographical coverage (additional surveys) • Additional criteria for transferability (cultural, risk perception)

  6. Extension of scope and coverage • Multimedia pathways • Air Vs soil and water • Prevailing effects on human health • Multimedia chains, extension of the impact pathway(s) • Exposure => food trade and consumption • Biotransfers (milk, meat, fish)

  7. Extension of scope and coverage • Biodiversity • Land use change, land take (power plants, distribution infrastructure), acidification, eutrophication • Limits of Contingent Valuation (and relevance to energy production) • Methodological problem: how to measure •  • PDF (Potentially Disappeared Fraction) • Costs of compensation

  8. Other areas for improvement • Methodologies • Improvement of Exposure-Response functions • Generalisation and transferability of external cost values • Inter-sectoral issues associated to internalisation policies • … • Scope and coverage • External costs associated to the security of energy supply • Extraction and transport (e.g. oil spills) • …

  9. Integration into policy and decision making • Long term perspective • Future technologies

  10. “Future” energy technologies • hydrogen technologies • fuel cells • offshore wind • photovoltaic • concentrating solar thermal power plant • biomass (including wet) • wave energy • geothermal • … BUT ALSO… • advanced fossil fuels • advanced nuclear • …

  11. Integration into policy and decision making • Long term perspective • Future technologies • Dynamic LCA (time- and scenario-dependent)

  12. €/kWh LCA of individual technologies External costs per unit emission Time dependency Scenario dependency

  13. Integration into policy and decision making • Long term perspective • Future technologies • Dynamic LCA (time- and scenario-dependent) • Individual technologies Vs policy packages •  • Meaningful and credible scenarios • Improved modelling fully integrating LCA and external costs (better technology representation, energy trade and cross-country harmonisation, impacts of internalisation…)

  14. The NEEDS Integrated Project (FP6)New Energy Externalities Developments for Sustainability

  15. Is it worth the effort? YES! • Awareness => orders of magnitude • Technology policy and investment priorities • External costs included in e.g. CBA • Small % variations in cost estimates may induce different ranking • Internalisation policies • Fair application of the user pays principle requires maximum accuracy • Avoiding (further) market distortions • Differentiation

  16. Thank you for your attention Andrea Ricci ISIS – Istituto di Studi per l’Integrazione dei Sistemi – Roma aricci@isis-it.com www.isis-it.com www.needs-project.org

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